What sort of investments are included in fixed-interest funds?
include a combination of money market investments, government bonds and corporate bonds, and some equities.
These unit trusts vary in name depending on what they invest in. Here are the three main types…
Fixed-interest fund #1: Money market funds
Money market funds are one type of unit trust you’ll come across.
The money market is the market for trading short-term debt instruments. Short-term here means less than one year.
The funds are low risk and are good vehicles for holding for a year or two. They generate a regular income.
These funds are unlikely to keep up with inflation over the long-term so you shouldn’t invest in these funds for years.
Fixed-interest fund #2: Income funds
Income funds are slightly higher risk than money market funds. But they do tend to deliver a higher income and return on your investment.
These funds hold a mix of government and corporate bonds along with a small holding of equities.
Like money market funds, income funds are also unlikely to keep up with inflation over the long-term so you shouldn’t invest in these funds for the long-term.
Fixed-interest fund #3: Bond funds
Bond funds tend to concentrate on holding government bonds of differing maturities, with some exposure to corporate bonds.
These funds also offer a regular income, but again you shouldn’t hold these for long periods of time, maybe two or three years.
There are also international fixed-interest funds to consider. Just bear in mind that the risks are slightly higher with these due to the exchange rate risk you take on.
Currency changes can affect your returns.
If you want to invest in a fixed-interest fund, you’ll find a wealth of information of each of the relevant fund’s fact sheet.
So there you have it, the ins and outs of fixed-interest funds.
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